Why the private medical insurance sector needs to change

With the private medical insurance sector facing a long term decline, James Parker of CS Healthcare shares 3 important factors that need to be considered to bring the PMI industry back on course.

On the surface it may appear to those outside the industry that PMI (Private Medical Insurance) is doing rather well. Premiums are rising, profits are being made and solvency levels are healthy. But in fact the PMI sector faces the challenge of long term decline. Industry statistics may vary from year to year, but the long term trend is clear – fewer people in the UK now have PMI cover than at any time since the early 1990s.

Yet this is despite the fact that the NHS faces well-documented challenges and that people are more aware of their health than at any time in the past.

So why is PMI not seen as a priority by so many?

I think this is down to 3 major factors.

Firstly, the private medical sector as an industry focuses too much on price. Insurers criticise consultants and hospitals for being too expensive and vice versa. Given our product starts with a reputation for being expensive it is little wonder then that consumers and employers outside the market question whether there is value to be had. Insurers end up chasing the same dwindling pool of existing customers, increasing sales and administration costs yet doing little to bring anyone new into the market.

Secondly, we don’t focus enough on our core benefits. Private care offers rapid access to state of the art treatments and facilities alongside choice over who delivers care and where. Few industries can claim to be as genuinely life-changing and life-saving as ours, but we seem to be reluctant to spell that out.

I believe that is down to the third factor holding us back – we seem to be shy. Too often we are nervous of being accused of undermining or competing with the NHS. In fact we complement the NHS and can be part of the solution to the challenge of providing a comprehensive and inclusive healthcare system fit for the 21st century, but how often does anyone outside the industry ever hear that message?

So PMI needs to change to stop the long term decline. But there is another threat to the industry that means we need to start getting our message out more effectively.

The future will bring a seismic shift in how we pay for healthcare in the UK. We all know that the NHS in its current form is unsustainable. Demand grows year by year as new treatments become available and public expectations grow. Our ability to successfully treat more conditions year by year is a great human success story. But with it comes a cost. The increasing burden of the NHS on the public purse can be managed for a while. Efficiencies can be found, costs managed, corners cut, more money found, but ultimately government, of whatever political persuasion, will be forced to find a way of shifting some of the burden onto consumers, either directly, via employers, or both. There are clear parallels with the situation in the pensions industry, where state provision is gradually becoming a basic safety net and individuals are being pushed, along with employers, to take more responsibility for their pension saving via auto-enrolment.

There is an opportunity here for PMI, but also a threat. When the tipping point is reached in healthcare, we can either be part of the solution, or ignored as government introduces new systems, products or processes that render our industry obsolete. As key stakeholders, insurers, hospital groups and medical practitioners need to work more effectively together, but not just to grow our market for short-term gain: the real challenge is to make our industry relevant to the changes facing the healthcare system in the years ahead.

About the author

James Parker joined CS Healthcare as Chief Executive in January 2016. Established in 1929, CS Healthcare is a specialist provider of private medical insurance cover to those who work in or have previously worked in the Civil Service, public sector or charitable and not-for-profit organisations.

James is an experienced and successful business leader with a strong financial background, a wealth of knowledge in the health insurance business and a proven track record for leading and growing a business through a changing and challenging market environment.